"Skin in the Game"
March 21, 2011
I did a post some time ago about various common colloquialisms and "skin in the game" was one of them. In recent months, I have not heard the expression used very much - at least not as often as it once was. However, the expression is cropping up again as the government and the financial institution readjust their lending standards.
A recent article that was in "Broker Agent Social' written by Preston Howard of Rose City Inc in Pasadena was entitled "Higher Down Payments may be the New Norm...Permanently".
As the federal government attempts to reform both Fannie Mae and Freddie Mac, the two government sponsored entities that purchase most of the mortgages made by lending institution, there is a serious consideration that all borrowers must have at least 10% down payment. Sheila Bair of the FDIC actually is calling for a minimum 20% down payment.
The argument boils down to "How much skin in the game" should a borrower be willing to contribute?"
FHA mortgages can still be obtained with only a 3.5% down payment. These loans have been the most popular lending vehicle for the past year or two with approximately 50% of all loans being FHA guaranteed loans.
VA loans were created in order that veterans would be able to purchase homes. A VA loan requires no down payment and perhaps will not be changed since the motivating factor behind the creation of the VA loan was to give assistance to those who had served in the armed forces.
As the government works to put home financing on a more stable footing, they recognize that they could derail a fragile recovery. Still, the concept of "skin in the game" is an attractive requirement. The question is "How much "skin" should be required?
I did a post some time ago about various common colloquialisms and "skin in the game" was one of them. In recent months, I have not heard the expression used very much - at least not as often as it once was. However, the expression is cropping up again as the government and the financial institution readjust their lending standards.
A recent article that was in "Broker Agent Social' written by Preston Howard of Rose City Inc in Pasadena was entitled "Higher Down Payments may be the New Norm...Permanently".
As the federal government attempts to reform both Fannie Mae and Freddie Mac, the two government sponsored entities that purchase most of the mortgages made by lending institution, there is a serious consideration that all borrowers must have at least 10% down payment. Sheila Bair of the FDIC actually is calling for a minimum 20% down payment.
The argument boils down to "How much skin in the game" should a borrower be willing to contribute?"
FHA mortgages can still be obtained with only a 3.5% down payment. These loans have been the most popular lending vehicle for the past year or two with approximately 50% of all loans being FHA guaranteed loans.
VA loans were created in order that veterans would be able to purchase homes. A VA loan requires no down payment and perhaps will not be changed since the motivating factor behind the creation of the VA loan was to give assistance to those who had served in the armed forces.
As the government works to put home financing on a more stable footing, they recognize that they could derail a fragile recovery. Still, the concept of "skin in the game" is an attractive requirement. The question is "How much "skin" should be required?
posted by shirley harry at 8:19 AM
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